holiday let mortgage

Holiday let mortgages continue to grow in availability with the number of mortgage deals available tripling since 2020, according to Moneyfacts. This figure is also up by a quarter since September 2021, showing the rapid growth that is still happening in this sector of the UK mortgage market. With this increase in the availability of holiday let mortgages, investor confidence is also growing with Hodge Bank reporting a rise of 173% in holiday let mortgage applications.

The growing numbers interested in UK holidays or ‘staycations’ are likely responsible for the rise in holiday let mortgage options as holiday let properties become increasingly popular among UK expat and foreign national investors responding to the surging demand for this type of let.

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Holiday Lets an Excellent Option for UK Expat and Foreign National Investors

‘One good reason to choose a holiday let over a more traditional buy-to-let property is that a holiday let could be more profitable than a long-term let’ says Stuart Marshall. ‘Holiday lets can command higher prices – so much so that a week of renting a holiday let can earn as much as a month of renting a long-term let. This means that the national average rental yield for a holiday let is predicted to rise to 14% by 2022. Meanwhile, the average rental yield for a long-term let is 4.77%, with even the highest current average rental yield standing at 6.92% (Newcastle). This puts in perspective just how profitable a holiday let can be when purchased using a UK expat or foreign national holiday let mortgage.’

‘Further, there are some great tax benefits to be had from a holiday let property. The most obvious of these is the ability to claim mortgage interest tax relief which is now denied to most landlords. Further, any running expenses (such as bills, maintenance costs and the replacement of furniture) can also be claimed as tax expenses and the property will often be eligible for business rates instead of council tax. Of course, the property must also satisfy some rules to reap the maximum benefits. For example, new rules surrounding holiday lets require the property to be rented out for a minimum of 70 days a year and available to let for 140 days a year in order to be eligible for small business rates relief. However, with the right property in the right area, this shouldn’t be hard to achieve.’

Holiday Let Hotspots in the UK

For UK expat and foreign national investors looking to invest with a UK holiday let mortgage, there is a wide range of choice available for where to buy. There were a number of holiday let hotspots where prices have jumped dramatically in the past 12 months and these areas will likely be areas on interest when it comes to consumer demand. Therefore, investors who buy in these areas increase their chances of reaping strong returns and making sure that their property is let for as many days as possible.

Cornwall.
Amongst the most popular locations for UK holidaymakers and holiday let investors is Cornwall. Home to some of the most incredible landscapes in the UK, Cornwall is a constant draw for those looking for a staycation. Consequently, Cornwall is also an incredibly popular destination for investors utilising UK expat and foreign national holiday let mortgages.

Padstow has always been a popular town for UK holidaymakers, famous for its concentration of fantastic restaurants and as a retreat for those with second homes, which also contribute to the high prices in the area. Cornwall is, by far, one of the most expensive locations for investing using a holiday-let mortgage, with the average asking price in Padstow sitting at £658,588 according to Rightmove – a 20% increase in price in the last 12 months.

A slightly more affordable location to invest in using a UK expat or foreign national holiday let mortgage is St. Ives. St. Ives, like much of Cornwall, is home to some stunning beaches but has a uniquely stylish town to boast too. The average asking price in St. Ives is significantly lower than in Padstow –£473,161 compared to £658,588. While this is still expensive by the standards of many other holiday let hotspots and traditional buy-to-lets, there is a great variance in price. Though a two-bed cottage will often cost in the region of £450,000, flats often skew far cheaper with a one bed available for around £200,000.

Cheaper still is Newquay, where the average asking price has increased 13% in the last twelve months to £317,846. Newquay boasts 12 incredible beaches and a vibrant nightlife scene which is sure to appeal to tourists young and old. It’s also an incredibly popular spot for surf enthusiasts. Because of a massive boom in development, Newquay has great stock availability which contributes to the lower prices seen here compared to other areas in Cornwall.

According to data from Airdna, the average annual revenue for a holiday home in Cornwall is £33,594. Using this average along with the average asking prices for Padstow, St.Ives and Newquay, we can calculate annual rental yields of 5.1%, 7.1% and 10.6% respectively. Obviously, this amount will vary greatly depending on the type of property, the actual cost of the property, and the occupancy rate. However, using averages is a good way to estimate a guide figure for the rental yield.

North Yorkshire.
A far more affordable area than Cornwall is North Yorkshire, which has become an incredibly popular destination for staycations. One area that has seen astonishing growth in the last year is Whitby, where asking prices have increased by an astonishing 17%. This brings the average asking price of a property in Whitby to £254,218 – significantly lower than the Cornish competition. Despite this lower asking price, the typical average occupancy rate for a property in Whitby is 70% and average nightly rates are £128 a night. Using these figures gives us an average annual revenue of £32,704 which would put the average rental yield for Whitby at 12.9%.

Not far from Whitby is Filey, a fishing village home to a five mile stretch of sandy beach. Here, prices increased by 13% in the last year. However, the average asking price for a property in Filey is still far more affordable than much of the competition, making it incredibly accessible for those utilising the excellent UK expat and foreign national holiday let mortgage deals available at the moment.

With the popularity of holiday lets continuing to increase and properties getting booked up sometimes years in advance, holidaymakers are looking toward the hidden gems in the UK holiday market – and, at the current prices, Filey could well be the perfect hidden gem location.

Wales.
Wales is another region that is home to excellent options for those using a UK expat and foreign national holiday let mortgage. Areas like Porthcawl have increased by 14% to an average asking price of £307,051. Using Airdna’s figures again, we can estimate the average rental yield for this area to be around 12.8%.

Pwllheli similarly increased in asking price by 13% but to a much lower figure of £222,607. This presents excellent investment opportunities for an area with the draw of two Blue Flag beaches, a marina, golf course and a sailing club. It is also incredibly close to Snowdonia National Park. Using the same source and calculation as the previous areas we have examined, this would give an average rental yield of 15.1%.

The strength of holiday lets in Wales is evident in the fact that Wales has seen the biggest regional increase in the number of holiday let companies that have been established in the last year – up by 131%.

By Ulysses

Source: Ein News

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There is reported to have been a ‘staycation boom’ in the UK during the pandemic. This would make sense; after all, international travel has been fraught with additional complexity and cost, if not being rendered completely impossible for long periods over the past two years.

Indeed, it was recently reported that 39% of Britons would be more inclined to holiday in the UK post-pandemic. But the appetite for staycations was already well established before we had ever heard of Covid-19. A quick glance back to 2019 reveals that while 93 million Britons jetted overseas, whilst 123 million chose to holiday in the UK, suggesting that the ‘boom’ is simply an uptick in a stable domestic tourism industry – one that is worth over £1.6 trillion.

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The strength of this industry, which is expected to grow further, has naturally impacted the property investment sector. Namely, more investors – particularly buy-to-let investors – are now considering holiday lets as a means of diversifying their portfolios. For those who fall into this camp, it is important to first understand the suitability of investing in holiday lets, including both the potential pitfalls and benefits that such an investment entails.

Reasons to be wary
Profitability – landlords acquiring a new property that they intend to use as a holiday let are likely to have paid an inflated price. Location is a very important factor in the success of a holiday let, and increased tourism in the last two years have pushed property prices up in tourist hotspots. Further, many properties will need furnishing and renovation to qualify as a holiday let. So, an initial outlay is common before income from holidaymakers starts to filter through; this could pose a potential barrier to some investors.

Running costs – with the cost of cleaning, energy and maintenance falling under the landlord’s remit, the regular turnover of guests creates some significant outgoing costs that can limit the money made on a property. Investors should also be aware that letting agents can charge between 20-30%, a necessary cost if they would prefer not to carry out the day-to-day management of the property. All these costs will eat into an investor’s yield.

Lack of guests – unfortunately, the old adage ‘build it and they will come’ is not a guarantee in the holiday let market. Despite sites like Airbnb creating easier platforms to market holiday lets, it is unlikely that properties will ever be at full capacity all year round. As holiday lets must be let for a minimum of 105 days to earn their potential tax benefits (more on this below), failure to attract guests could be disastrous to a property’s profitability.

Threat of regulation – with London capping short-term lets to just 90 nights a year unless planning permission is acquired, regulation in the holiday let industry is likely to increase. Areas like Cornwall and Bournemouth have seen incidents of ‘over-tourism’, and local councils may bring further regulation in to compensate.

Difficulty in finding finance – the relative insecurity of short-term lets makes borrowing from high street lenders difficult. As such, landlords could look for alternative financial backers. In doing so, lenders who underwrite on a case-by-case basis are essential to securing the best deal. Despite high-interest rates, variable discount rates and large down payments, investors and their brokers could consider their financial options as they hunt for the property itself in order to secure a deal that is most beneficial to their needs.

The benefits to be had
Those are the challenges, of which there are plenty. But that ought not to overshadow the potential upsides – again, there are numerous.

As many experts suggest, investment in different markets can maximise returns as each asset will react differently to market fluctuations. While it certainly does not guarantee against loss, diversification can reduce risk. The potential benefits listed below reflect why many landlords regard holiday lets as an increasingly interesting way to diversify their portfolios.

Tax benefits – if a property qualifies as a Furnished Holiday Let (as defined by HMRC), landlords are able to claim Small Business Rate Relief, thus avoiding council tax or business rates on their property and increasing the potential for profit. Furthermore, landlords can offset energy, cleaning and maintenance bills against their profits, reducing their tax bill further. If they choose to sell, they can even claim some capital gains reliefs, increasing the value of a holiday let as an asset.

Yields – as a result of these tax reliefs, and a rental price increase of 41% since 2020, holiday lets can make 30% more yield than a BTL property. With most aiming for a return of 8% annually and an average profit target of 30% (rising to 50% on properties without mortgages and letting fees), holiday lets begin to look like a credible alternative to an established portfolio.

Holiday home – the potential benefit that might have intrigued landlords the most during the pandemic is the opportunity to use a holiday let as a personal holiday home. To qualify for tax reliefs, holiday lets must be available to let for at least 210 days leaving landlords 22 weeks a year to use it themselves if they choose. With restrictions on international travel and a working from home order in place, the option to travel to a second home for free makes a holiday let an even more intriguing alternative to landlords.

Final thoughts
As restrictions ease and international travel continues its revival, it will be fascinating to see whether staycations remain as prominent, both in the media and with holidaymakers. For landlords considering a holiday let, they should weigh up whether they are capable of navigating the various pitfalls of the market. Those who are successful could certainly start to reap the attractive benefits a holiday let has to offer.

By Paresh Raja

Source: Finance Monthly

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More Britons than ever are looking to holiday at home during the upcoming half-term break with bookings soaring for UK destinations.

Figures from holiday home rental agency Sykes Holiday Cottages revealed bookings for February half-term are up 27% versus 2020, with the number of people booking staycations surpassing pre-pandemic levels.

Meanwhile, bookings so far this year are up 22% compared to the same point in 2020, while there has been a 158% increase in bookings compared to the same period last year.

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In particular, Britons are booking staycations in Whitby, Ambleside and Bowness-on-Windermere, with these three locations witnessing the greatest volume of bookings for 2022.

Meanwhile, in a survey of 1,000 UK guests, Sykes found that 55% of British holidaymakers say they will still opt for UK staycations even when all international travel restrictions have lifted.

On average Brits are planning to take two staycations in the next 12 months, with almost half (46%) saying limiting their environmental impact is a key consideration when choosing a UK break over foreign travel.

Other factors for opting to holiday closer to home include the ease and convenience (52%) and getting to enjoy the outdoors (72%).

Graham Donoghue, chief executive at Sykes Holiday Cottages, said: “Bookings for our holiday lets this year are through the roof, showing that the staycation boom is here to stay.

“While bookings for February half-term have been record-breaking, we expect Easter and summer to be no different, and bookings are already coming in for autumn and winter thick and fast.

“Brits are looking to make the most of what our beautiful country has to offer and the self-catered option still appears to be a popular choice as contact with others can be limited.

“Clearly environmental considerations are also playing a role in the decision to staycation too. This is something we were starting to observe before the pandemic but it has really taken off over the last two years.”

By Brett Gibbons

Source: Wales Online

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Hotel transactions worth more than £2bn – including two notable deals in Plymouth – took place in the region in 2021, as the staycation boom attracted investors to the lucrative holiday market.

Across the region hotels were hot property with global real estate advisor Savills revealing the region saw £2.04bn changing hands as hotels were bought and sold.

And the South West hotel market continued to be in demand with investment volumes climbing 8.2% compared with 2020, to £86.1m, according to Savills.

The company represented more than 40% of hotel assets transacted in 2021 in the South West.

Key deals include the sale of Treloyhan Manor, in St Ives, Cornwall, to Manchester-based developers for more than £3m off a guide price of £1.75m,

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The Dial House, in Bourton on the Water, Gloucestershire, was sold to overseas investors off a guide price of £2.5m.

James Greenslade, director in the hotel capital markets team at Savills Exeter, said: “The regional hotel market has performed exceptionally well, driven by consumer demand for staycations.

“While accelerated by the pandemic lockdowns, this is a theme that will continue as holidaymakers seek out more environmentally friendly and sustainable holidaying, a trend that was emerging pre-Covid.

“The South West has some of the best holiday locations in the UK and investors are drawn to locations such as Cornwall and Devon where long-term demand for leisure-led hotels is expected to be high.”

Other notable deals in 2021 included the purchase of Welbeck Manor pile, at Sparkwell on the edge of Plymouth, a manor house built by Isambard Kingdom Brunel.

New owners Paul Stone and Paul Yarnley, and their families, have invested a “substantial amount” into a complete revamp of the property which was to reopen as a hotel and fine dining restaurant after an expensive renovation.

Also in Plymouth, Grade II* listed Langdon Court hotel was bought by Britain’s “jean queen” fashion designer and her restaurateur husband to be reopened as a “top level” venue.

Donna Ida Thornton, founder of London’s Donna Ida fashion brand, and her spouse Robert Walton purchased the 16th Century Jacobean manor, which had been closed for 18 months after the previous owner went into administration.

The purchase price of Langdon Court, in Wembury, has not been revealed, but it was put on sale in 2020 with a guide price of £1.85m.

Also in 2021, the historic and award-winning Mill End Hotel, situated in Dartmoor National Park close to the town of Chagford, was sold after going on the market for £2.1m

The hotel was purchased from Nick and Tara Culverhouse by Alex Horsfall, an experienced operator who already owns The Valley, situated between Truro and Falmouth in Cornwall.

Meanwhile, North London’s Amayo Properties Ltd bought the closed Richmond Hotel, in Torquay, from hospitality company the UK Holiday Group, based in Norwich, off a guide price of £950,000 and said it will reopen it to guests.

ByWilliam Telford

Source: Plymouth Herald

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Increased awareness of the staycation sector and the focus on sustainability mean holiday lets will keep attracting landlords, says Andy Virgo of LendInvest.

For obvious reasons, the UK AirBnB and staycation industry has boomed in the past couple of years as uncertainties around travel have kept Brits looking at home for their getaways.

This has rewarded portfolio landlords, who have diversified their properties and found yield in the holiday-let market.

As a grey and cold start of the year is lit up by more and more holiday adverts on our TVs and phones, we are looking again at what holidays we could be enjoying this year.

In keeping with the past two years, the market could maintain its rapid growth as travellers continue to holiday at home; alternatively, fewer travel restrictions could reshape the industry again as people take the opportunity to start going abroad.

After two years of rapid change, what could be in store for the market in the next 12 months?

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The year ahead

Recent history has raised the awareness of the stay-at-home holiday sector a huge amount, in particular the diversity and range of properties available for short-term holiday lets.

This should put the market on a good platform, even with (potentially) increased foreign travel available as the year progresses.

A focus on sustainability and reducing one’s carbon footprint is happening across all areas of people’s lives, and studies are showing travellers keen for ‘green’ holidays, which all plays in favour of the ‘staying local’ holiday market.

Increased foreign travel can be a boon for the sector in this country as well, with more travellers coming into the UK.

The role of the lender in supporting holiday lets

The main differentiators — aside from rates — are how lenders choose to value holiday lets and the flexibility of their criteria.

As more landlords look to diversify their portfolio with these types of let, lenders must be responsive to the needs of the market to support them.

Bricks-and-mortar investments are solid for the long term, which is why the relative ‘gamble’ of a holiday let is a step many are willing to take because the long-term rental and housing markets remain strong.

If demand slips, remortgages to long-term rental deals or selling the home in a buoyant market remain successful outcomes, which lenders should be willing to facilitate.

There remains opportunity for landlords willing to explore holiday lets as a means of diversifying their portfolio.

After two frantic years for the market, we can expect some realignment as things approach a new normal in 2022. But the need for high-quality accommodation — for short or long stays — won’t go away.

Source: Mortgage Strategy

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Picturesque Bideford has become a staycation favourite, travel firm Snaptrip has named it the most popular choice for customers so far this year.

Part of its appeal lays in its proximity to outstanding nature and landscapes, making it the perfect getaway destination for stressed Londoners and other city-dwellers. It allows easy access to some of the region’s most stunning beaches, as for example those at Westward Ho! and Croyde Bay.

For those interested in getting off the mainland, Lundy Island is another close-by destination that can easily be reached from Bideford. It is home to some rare animals such as puffins and has itself enjoyed a massive increase in visitors over the last couple of years.

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Bideford itself has lots to offer too, though. Particularly lovers of literature will likely be excited by its many cultural offerings. The author Charles Kingsley lived here and the charm of the town is clearly visible in his works. The nearby village of Westward Ho! even got its name from one of his novels!

If tourists want to do a bit of shopping, visiting historic Pannier Market, which is a favourite among locals and offers a wide variety of locally made products, is a great way of doing so. Of course, you can also find well-known high street stores in the town centre, as well as a number of quirky independent shops, making for a pleasant shopping experience.

It is great to see Bideford’s tourism offering doing so well, meaning more people will get to know the area and its many beautiful landscapes and exciting opportunities. Given that places two and three in the ranking are occupied by ever-popular Newquay in Cornwall and Keswick in the Lake District, Bideford’s first place truly shows its outstanding quality and appeal.

By Luisa Rombach

Source: North Devon Gazette

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A new study by the research team at WeThrift has uncovered the most romantic staycation destinations in the UK and Lewes has landed in the top five.

According to the research, the East Sussex town landed in fourth place with an overall score of 58.4, boasting 79 things to do, as well as being within a 30-minute drive to the nearest beach.

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The town also has 66 walking trails, eight florists and 10 jewellery shops within a five mile distance.

Lewes tanked fourth in the list – behind Henely-On-Themes, Truro and Windsor.

Windsor, Berkshire is officially the UK’s most romantic staycation destination with an overall score of 64.7 out of 80. The town is home to Windsor Castle, an official residence of the British royal family, as well as the royal Windsor racecourse and a Legoland resort, plus as many as 135 more things to do.

By Frankie Elliott

Source: Sussex Express

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